On or after April 24, 2001, Robert M. Schwartzberg intends to deliver the
following letter to shareholders of Horizon Group Properties, Inc.
Robert M. Schwartzberg
5124 44th St., N.W.
Washington, D.C. 20016
April 24, 2001
Dear Fellow Shareholder:
This letter is being delivered to you as a shareholder of Horizon
Group Properties, Inc. ("Horizon") in connection with my proxy solicitation
to elect myself and Mr. John C. Loring to the board of directors of Horizon.
Horizon's annual meeting is scheduled for 10:00 a.m. on May 8, 2001.
I believe that we are all extremely frustrated with management's
inability to execute on the strategic plan set forth by them and that
initially attracted many of us to this investment. My frustration is
increasingly turning into serious concern as we get closer to July 2001 when
approximately $50 million in debt becomes due. I believe that the situation
requires immediate action which can only be achieved if we have truly
independent voices on the Board.
It has been nearly nineteen months since management began to form
and act on a plan to enhance shareholder value. On September 24, 1999,
management first announced that it had hired Secured Capital to "assist in
studying strategic alternatives to enhance shareholder value including, but
not limited to, the sale or disposition of some or all of its real estate
portfolio. Concurrently, the Company is assessing alternative business
opportunities going forward." Source: Horizon, Form 8-K, dated September 24,
1999. Subsequently, Mr. Skoien's letter to shareholders in the 1999 Annual
Report stated, "Management is reviewing some exciting situations, which will
enable us to deploy the proceeds from a sale and take advantage of the
resulting tax losses."
However, management has had very limited success executing its plan or
enhancing shareholder value over the last nineteen months as evidenced by:
o The sale of only one out of seven centers in the Nomura pool
for $2.5 million in January 2001.
o To date, the failure to refinance any of the other centers in
the Nomura pool.
I believe that management's failure to execute its plan is largely
responsible for depressing the value of our shares below their true worth.
The shares have declined sharply from their all-time high of $6.75 on July 1,
1998, including a 28.6% drop from September 24, 1999 when management first
announced their plan to enhance shareholder value. Assuming you owned $10,000
of Horizon stock as of September 24, 1999, your investment would be worth
only $7,142 today. To put this in perspective with respect to other outlet
REITs, the same $10,000 in Chelsea Property Group, Inc. or Tanger Factory
Outlet Centers, Inc. would be worth $16,118 and $11,410 respectively
(assuming reinvestment of dividends when paid). Meanwhile, the same $10,000
invested in Prime Retail, Inc. would be worth $556. Mr. Reschke was Chairman
of Prime Retail, Inc. from its inception until he relinquished his post in
July 2000.
I think we all have to question whether the Board's nominees are
even able to act in the best interests of all shareholders, given that:
On April 18, 2000, the Company made a $1.5 million loan to Prime
Outdoor LLC, an affiliate of Prime Group, Inc, which is an affiliate of
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Mr. Michael Reschke, a current director of Horizon and a nominee to the
Board. This loan was repaid on June 9, 2000. I believe the ability to tap our
company for financing when desired may serve to disincentivize him from
considering strategic alternatives in the best interests of all shareholders.
o A building owned by an affiliate of Mr. Reschke, Prime
Group, Inc., received $121,000 in rent from Horizon during 1999 and $95,000 in
rent from Horizon during 2000. I believe the possibility of losing this
rental income may also prevent him from considering what is best for all
shareholders.
o Mr. Gary Skoien is Chairman, President and Chief Executive
Officer of Horizon, while also serving as Executive Vice President and Chief
Operating Officer of the Prime Group, Inc., as noted above, an affiliate of
Mr. Reschke.
SUMMARIZING THE ABOVE, THIS IS NOT JUST MR. RESCHKE'S COMPANY ... IT BELONGS TO
ALL OF US AND WE NEED TRULY INDEPENDENT BOARD REPRESENTATION TO MAKE SURE
IT IS OPERATED THAT WAY.
I believe that there are several reasons why John Loring and I will
be more effective in representing your interests than the Board's nominees.
- We are each committed to representing your interests exclusively.
We don't have any conflicting interests to consider when evaluating decisions
concerning your investment.
- We are each deeply committed to enhancing the value of HGPI
shares. Like many of you, this investment represents a large percentage of
my personal net worth. I believe that the strength of my personal commitment
lies in the fact that, excluding Mr. Reschke, I own nearly twice as many
shares as the other four existing Board members COMBINED.
- We are well qualified to understand the issues confronting our
company and make sound business decisions to maximize our investment. I
personally have thirteen years of capital markets experience including direct
experience in REITs and the financing of distressed financial institutions
and real estate-related companies. Mr. Loring is an attorney, Chairman of
the Board of Directors of Astrex, Inc. and also a director of Geauga Savings
Bank. I refer you to our Preliminary Proxy Statement on file with the
Securities and Exchange Commission for a complete description of Mr. Loring's
and my qualifications.
For your information, I am the holder of 5.05% of the outstanding
common stock of Horizon and Mr. Loring, together with his wife, owns .8% of the
common stock of Horizon. Please see our Schedule 13Ds on file with the
Securities and Exchange Commission for more information on our respective
shareholdings, which is our only current interest in Horizon. No other person is
a participant in this solicitation.
PLEASE READ MY PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT
INFORMATION. THE PRELIMINARY PROXY STATEMENT, THE SCHEDULE 13DS FOR MR.
SCHWARTZBERG AND MR. LORING, THE COMPANY'S SECURITIES FILINGS AND, WHEN
AVAILABLE, THE DEFINITIVE PROXY STATEMENT, CAN BE OBTAINED FOR FREE AT
WWW.SEC.GOV. A DEFINITIVE PROXY STATEMENT AND FORM OF PROXY WILL BE AVAILABLE
FOR FREE FROM MR. SCHWARTZBERG WHEN AVAILABLE, WHICH IS EXPECTED TO BE ON OR
ABOUT APRIL 30,2001.
IT IS MY HOPE THAT YOU WILL WAIT TO REVIEW MY DEFINITIVE PROXY
MATERIALS BEFORE TAKING ANY ACTION WITH RESPECT TO THE ANNUAL MEETING. EVEN IF
YOU HAVE ALREADY VOTED FOR THE BOARD'S NOMINEES, YOU ARE ENTITLED TO CHANGE
YOUR VOTE UP UNTIL THE MEETING. Please feel free to call me at (202) 367-3014
for more information.
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In conclusion, I believe a vote for the Board's nominees to the Board
means that you are willing to passively accept another twelve months of stalled
initiatives and historical share price performance. A vote for John Loring and
myself means that you would like to proactively take steps to enhance the value
of your investment.
Sincerely,
/s/ Robert M. Schwartzberg |
